Ex-Cuomo Aides Charged in Federal Corruption Inquiry

Joseph Percoco, left, with Gov. Andrew M. Cuomo of New York in 2013. Mr. Percoco, who is now facing corruption charges, was Mr. Cuomo’s all-purpose body man and political enforcer.Credit
Mike Groll/Associated Press

Federal corruption charges were announced on Thursday against two former close aides to Gov. Andrew M. Cuomo, a senior state official and six other people, in a blow to the governor’s innermost circle and a repudiation of the way his prized upstate economic development programs were managed.

The charges against the former aides, Joseph Percoco and Todd R. Howe, and the state official, Alain Kaloyeros, were the culmination of a long-running federal investigation into the Cuomo administration’s efforts to lure jobs and businesses to upstate New York’s limping economy by furnishing billions of dollars in state funds to developers from Buffalo to Albany.

In doing so, says a 79-page criminal complaint unsealed on Thursday, Mr. Percoco and Mr. Howe sought to enrich themselves through bribes, using their positions to help particular companies receive “hundreds of millions of dollars in state contracts and other official state benefits.”

The charges mark the second major inquiry of the Cuomo administration by the office of Preet Bharara, the United States attorney in Manhattan; eight months ago, after investigating Mr. Cuomo’s handling of an anticorruption panel that he had created and abruptly shut down, Mr. Bharara said there was “insufficient evidence to prove a federal crime.”

“There are no allegations of any wrongdoing or misconduct by the governor, anywhere in this complaint,” Mr. Bharara replied. “That’s all I’m going to say.”

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Charges Against Ex-Cuomo Aides Announced

Preet Bharara, the United States attorney for the Southern District of New York, announced corruption charges against nine men, including Todd Howe and another former close aide to Gov. Andrew M. Cuomo.

By REUTERS on Publish Date September 22, 2016.
Photo by Dave Sanders for The New York Times.
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If the charges did not hit Mr. Cuomo directly, they did hit him in a peripheral and personal manner: Mr. Percoco and Mr. Howe were both loyalists of Mr. Cuomo and his father, Gov. Mario M. Cuomo, for whom they had also worked. Andrew Cuomo once referred to Mr. Percoco as “my father’s third son, who I sometimes think he loved the most.”

Mr. Cuomo had also spoken highly of Dr. Kaloyeros, depicting him as a visionary in the field of nanotechnology, which Mr. Cuomo has heralded as a potential boon for the state economy.

Mr. Bharara’s office and F.B.I. agents in Buffalo had been examining whether state officials awarded lucrative projects to a few favored developers who had donated to the political campaigns of Mr. Cuomo, a Democrat. One major area of interest was the administration’s plan to inject $1 billion in state funds into Buffalo-area factories, research facilities and other projects, known together as the Buffalo Billion.

The resulting investigation yielded a rich narrative of three trusted counselors to Mr. Cuomo conspiring to help the favored contractors, rigging bids and doling out other favorable treatment. The complaint also portrayed the defendants as trying to conceal the schemes, sometimes in unusual ways.

In emails and other correspondence, Mr. Percoco and Mr. Howe referred to bribe money as “ziti,” a term used in “The Sopranos,” the complaint says. Mr. Percoco, Mr. Howe and others also called one another “Herb” as a term of endearment, while discussing the arrangement.

Mr. Bharara said at a news conference on Thursday that he hoped the case would go to trial “so that all New Yorkers can see, in gory detail, what their state government has been up to.”

Mr. Percoco, who had served as Mr. Cuomo’s executive deputy secretary, is accused of soliciting and taking more than $315,000 in bribes from 2012 to 2016 from two companies: Competitive Power Ventures, an energy company that was seeking state approval to build a power plant in the Hudson Valley, and COR Development, a major developer in the Syracuse area that ended up with several large state-funded economic development projects.

The bribes were arranged by Mr. Howe, who counted both companies among his clients, the complaint said. Mr. Howe is cooperating with the investigation, prosecutors said, and pleaded guilty this week to extortion, wire fraud and related conspiracy charges. His lawyer, Richard J. Morvillo, would say only that his client “has accepted responsibility for his actions and will testify truthfully if called upon.”

In one instance cited in the complaint, prosecutors say Mr. Howe sent an email to Dr. Kaloyeros saying he had “vitals for Buffalo and Syracuse friends.” He was working with a prominent corporate donor, LPCiminelli, a builder based in Buffalo, to create a request for proposals that effectively made LPCiminelli the only eligible bidder.

Neither the energy company nor the developers in Buffalo and Syracuse are named in the complaint, but several defendants charged are among the companies’ top officials.

They include Peter Galbraith Kelly Jr., who oversaw lobbying and public relations for Competitive Power Ventures, which is based in Maryland and Massachusetts; Steven Aiello, the president of COR Development; and Joseph Gerardi, another executive at COR. The complaint also charges Louis Ciminelli, the founder of LPCiminelli; and Michael Laipple and Kevin Schuler, two other LPCiminelli executives.

Mr. Kelly is accused of offering and paying Mr. Percoco more than $287,000 in bribes in exchange for Mr. Percoco’s help. The payments were made to Lisa Toscano-Percoco, Mr. Percoco’s wife, who was ostensibly employed as a consultant to Competitive Power Ventures’s educational outreach arm starting in 2012.

Competitive Power Ventures wanted Mr. Percoco’s help obtaining a state contract worth approximately $100 million to finance its power plant in the Hudson Valley, as well as millions of dollars in energy credits for a power plant it was building in New Jersey.

The COR executives, Mr. Aiello and Mr. Gerardi, were accused of giving Mr. Percoco about $35,000 in bribes to use his position in the governor’s office to promote the company’s economic development projects.

According to the complaint, they sought Mr. Percoco’s help in reversing a decision by the state’s economic development agency that would have forced COR — Mr. Cuomo’s largest donor in central New York — to make an expensive labor peace agreement; pushing the state to release payments that it owed to COR; and getting a $5,000 raise for Mr. Aiello’s son, who worked for Mr. Percoco at the governor’s office.

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The charges in the complaint included bribery, extortion under color of official right, and wire fraud and honest services fraud conspiracies.

The defendants appeared in federal courts in Manhattan, Syracuse and Buffalo on Thursday and were ordered released on bond. The expected charges against Mr. Percoco were first reported by The Wall Street Journal.

Mr. Percoco’s lawyer, Barry A. Bohrer, characterized the prosecution as “an overreach of classic proportions,” adding that a Supreme Court decision in June that overturned the corruption conviction of former Gov. Bob McDonnell of Virginia established that his client’s conduct was lawful.

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Joseph Percoco in 2016.Credit
Louis Lanzano for The New York Times

“Mr. Percoco performed services honestly and within the bounds of the law at all times,” Mr. Bohrer said.

A lawyer for Mr. Aiello and Mr. Gerardi declined to comment. Mr. Kelly’s lawyer, Daniel M. Gitner, said his client was innocent and “will be exonerated.” LPCiminelli, citing its three executives named in the complaint, said it was “confident that all company officials acted appropriately and legally” and would be vindicated.

Virtually all the state-funded projects were shaped under the umbrella of the State University of New York Polytechnic Institute and its subsidiaries. The institute is headed by Dr. Kaloyeros, a physicist who has become something of an economic development guru in Albany.

Dr. Kaloyeros had been given free rein by Mr. Cuomo to conceive of high-tech economic development projects that could create jobs across the state.

Michael C. Miller, a lawyer for Dr. Kaloyeros, said his client was innocent and “looks forward to being exonerated.”

Dr. Kaloyeros also was hit with separate charges on Thursday filed by the New York attorney general, Eric T. Schneiderman. Dr. Kaloyeros and Joseph Nicolla of Columbia Development, an Albany-area firm, were accused of colluding to make sure Columbia was awarded contracts to build multiple SUNY Polytechnic projects.

Mr. Cuomo said Dr. Kaloyeros had been suspended without pay.

When news of the investigation into the governor’s former aides broke in April, his office quickly cut ties to both men and ordered its own internal investigation. The results of that inquiry have not been released.

Mr. Cuomo said in a statement on Thursday that if the allegations were true, he would be “saddened and profoundly disappointed.”

“I hold my administration to the highest level of integrity. I have zero tolerance for abuse of the public trust from anyone,” he said. “If anything, a friend should be held to an even higher standard.”

Jesse McKinley contributed reporting.

A version of this article appears in print on September 23, 2016, on Page A1 of the New York edition with the headline: Former Cuomo Aides Took Bribes to Steer State Grants, U.S. Says. Order Reprints|Today's Paper|Subscribe